Yesterday I wrote about the need for competition in search from an Internet ecosystem perspective. But what if you are a shareholder in Yahoo or Microsoft? Should they outsource search to Google? Here too I believe the answer is a clear NO. If Google did not have grand ambitions that are directly competitive with large parts of Yahoo and Microsoft then this might make sense – but one would hardly recommend to GM to buy their engines from Toyota. Yes, there is a lot to a car other than the engine, but it’s difficult at best to be in the car business long term if you are buying the engine from a competitor.
This is not to say that Yahoo hasn’t made huge execution mistakes. As a public company when you make mistakes of that magnitude you may not be given the chance to fix them the right way but instead be forced into a short term fix or even a change of control.
Interestingly it’s also far from clear whether Google is really maximizing value for their own shareholders. Google is plowing much of the profit from the search advertising business into a series of startup businesses. The bigger a spend they build up, the less they will be in a position to split the spoils of search advertising more evenly with sites and searchers, leaving themselves open to competitive moves such as Microsoft’s cash back shopping search. That will not matter if the Google’s new initiatives become big cash producers in their own right, but that is as of yet unproven.
